Sebi looking into the extent to which bank owned mutual funds rely on their parents for sales

5 Sep 2022 , 09:40 AM

The capital markets regulator is looking into the selling procedures of mutual funds owned by banks. According to two people with knowledge of the situation, the Securities and Exchange Board of India (Sebi) is investigating the extent to which mutual funds rely on the branch network of their parent banks to market goods to investors and whether this results in misselling.

The regulator has asked bank-sponsored mutual funds for information on how much of their sales come from their parents, their policy for paying distributor fees, and the commission structures for parent banks in comparison to other distributors. Senior mutual fund industry officials claimed that Sebi’s request for this data from these asset management firms reflects the regulator’s dissatisfaction with certain of these banks’ lack of “open architecture” models. Sebi did not provide any explanation for this request in its email. Corporate agents like banks sell goods from several insurers under the open architecture distribution model used for insurance.

The CEO of a sizable mutual fund said, “The question that Sebi seems to be asking is whether mutual funds sponsored by banks are overly reliant on the parent banks for selling their products.

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